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Thanks to changes in state law and a revised city ordinance, condos are making a comeback in Berkeley. 

“That’s definitely the way it seems to me,” said City Planner Debbie Sanderson. “Since the city ordinance was changed earlier this year, there’ve been a lot more applications.” 

Mayor Tom Bates, for one, is delighted. “Condos are a very important opportunity to provide more home ownership. Owners who build up equity in their property contribute to community stability,” he said. 

“I think it’s very important for the downtown area and for the community as a whole to provide more options for ownership. I think in terms of the quality of the community, because people who invest in their homes have a long-term interest in the community,” Bates said. 

Before this year, the last condominium projects built in Berkeley were two Patrick Kennedy projects from the 1990s, one at Shattuck and Hearst avenues and the other at University Avenue and Grant Street, said Tim Stroshane, senior planner for the city Housing Department. 

“There were no more significant projects until this year,” he said. “Now there are several proposals for new projects and a couple of other projects that already have use permits are being reconsidered as condos,” Stroshane said. 

One major impetus for condomania is a recent change in state law. 

“A lot of the problems arose from the tort claims environment condo builders have faced since the early ‘90s,” Stroshane said. Construction defect lawsuits had made developers gun-shy, as had the six- and seven-figure insurance fees needed to protect them from crushing judgments. 

State legislators eased the crisis by setting a 10-year statute of limitations on construction defects, and Berkeley added another key step by raising the amounts developers could charge for the 20 percent of units which must be set aside as inclusionary units for lower income tenants in all new condo and apartment projects. 

Sale prices of the inclusionary units are calculated according to the Oakland Metropolitan Area Median Income—AMI—which Stroshane said was running about $82,200 earlier this year. 

Under the earlier city policy, owners had to sell the first inclusionary condo at a maximum of three times 90 percent of AMI, or $221,940, and the remainder at three times 81 percent, or $188,746. 

“Developers in Berkeley were not doing new condo projects because under those formulas they couldn’t even recover their costs, much less make a profit,” Stroshane said. 

Berkeley revised its inclusionary pricing standards earlier this year, with the new formulae coming into effect on Feb. 26 that bracket inclusionary sales prices to levels between three times 80 percent ($246,600) and three times 120 percent ($295,920). 

“If the average construction cost is more than three times 120 percent of AMI, the developer can charge no more than that, but in the likely event costs are lower than three times 80 percent, the developer can still sell at three times 80 percent,” Stroshane said. 

The new regulations were enacted for a two-year period, and city staff will evaluate their impact before the ordinance expires to determine their impact on the city and make recommendations on modifications or continuance before the law sunsets. 

Stroshane said the developers of two previously approved apartment complexes are considering changing them to condos—an Avi Nevo project at Shattuck Avenue and Delaware Street and a Sam Sorokin development at 3075 Telegraph Ave. 

Another project that seems headed for condo status is the nine-story Seagate Building proposed for Center Street. Developers proposing another large project at 700 University Ave. have also indicated they may follow the same path. 

Another project, a three-to-five-story 69-unit complex at 1122 University Ave., has been planned as a condo complex from its inception. By allocating a fifth of the units to low- and lower-income tenants developer Alex Varum was able to add an additional 14 units to the 55 that would have been allowed without them. 

The developer of a nearly completed apartment at 2616 Telegraph has filed a plan revision for condos, but a spokesperson for K&S Properties in Emeryville said the units will be rented as apartments, and the condo filing was intended to make the property more attractive in the event of resale. 

Although Bates said the idea hadn’t occurred to him, condos are increasingly attractive to tax-starved city governments, thanks to the effects of property tax-limiting Proposition 13, which sets a ceiling on annual property tax increases that is far below the inflationary pace of the California real estate market. 

Assessment increases on all real estate are capped at two percent a year until the property is sold, when it is reassessed at the new sales price, with assessment increases thereafter kept to two percent until the next sale. 

Commercial property typically has a much lower turnover than residential property, so an apartment that remains in the hands of one owner over a period of years pays ever-smaller amounts of taxes in comparison to the building’s real value. 

But apartments in the same building sold for condos are turning over much more rapidly, kicking in ever-larger amounts to city and county coffers. 

While condos are priced considerably below detached single-family homes—with average sales prices of $355,000 versus $600,000 in Berkeley earlier this year—costs are still heading upward, Stroshane said. 

“(Developer) Chris Hudson told me recently that a chief reason for the soaring material costs is the intense development going on in China. Their demand is driving up prices worldwide,” said the planner.o